TOKYO (Reuters) – Japan's Takefuji Corp (8564.T) plans to file for bankruptcy on Tuesday with $5.2 billion in debts, sources said, making it the biggest consumer lender to fail under the weight of court-ordered interest repayments and tighter lending rules.
Takefuji, which has been considered at risk for failure because it doesn't have the financial backing of any of Japan's big banks, will ask Japan's courts in the afternoon to protect it from creditors and will make an announcement later in the day, two sources told Reuters on condition they weren't identified.
A Takefuji spokesman declined to comment.
Shares of Takefuji were overwhelmed with sell orders for a second day on Tuesday.
On Monday, the shares were initially suspended by the Tokyo Stock Exchange after Japanese media reported that Takefuji was headed for bankruptcy. Once trade resumed near the end of the session, the stock remained untraded due to a glut of sell orders.
Takefuji said on Monday that it had not decided to file for bankruptcy, but would not comment on whether it was considering such a move. "It is untrue that we made such a decision as some media have reported," it said in a statement.
But the Tokyo exchange has placed Takefuji on watch for potential delisting, citing the possibility that the company could file for court protection.
Consumer lenders have been struggling for survival after a Japanese court ruled in 2006 that they had charged too much interest and had to reimburse borrowers. The industry has also been hit by a lowering of the maximum interest rate on loans.
Shares of other consumer lenders rose on Tuesday after having fallen sharply the previous day. Aiful Corp (8515.T) rose 2.2 percent and Acom Co (8572.T) gained 1.3 percent, while Promise (8574.T) was flat.
Consumer finance companies emerged as big lenders in the 1990s as Japan's economy tanked and commercial banks reined in credit. Able to borrow at very low rates, they charged interest of nearly 30 percent, which allowed them to absorb high default rates on uncollateralized loans.
Started as a small money lender in 1966, Takefuji grew to become Japan's biggest consumer finance company. Its founder Yasuo Takei was ranked by Forbes as Japan's second-richest person in 2005, worth $5.6 billion.
His company became known for airing a series of TV commercials featuring a group of spandex-clad dancers.
But a series of scandals over heavy-handed debt collection and the conviction of Takei, who in 2004 received a three-year suspended sentence for ordering wiretaps on journalists who had criticized his company, marked the beginning of a crackdown by authorities on a business seen by some industry critics as little better than loan sharking.
Takei never witnessed the demise of his company's fortunes, having died in 2006. Forbes this year valued his widow's worth at $2.5 billion.
Japan's consumer finance squeeze culminated this year with a state-engineered credit crunch. In June the government capped interest rates at 20 percent, down from 29.2 percent, and limited the amount individuals can borrow to a third of their income.
Takefuji had 433.6 billion yen ($5.2 billion) in liabilities as of the end of June, research firm Tokyo Shoko Research said. Outstanding debt in bonds amounted to 134.9 billion yen, including 30 billion yen in straight bonds, 52.2 billion yen in U.S. dollar denominated global bonds, 42.4 billion yen in convertible bonds and 10 billion yen in euroyen bonds.
Standard & Poor's Rating Services on Monday lowered its rating on Takefuji's long-term counterparty credit and senior unsecured debt a notch to CC from CCC-, categorizing the lender's bonds as very speculative.
"The company's funding ability may be further constrained if business counterparties move to adopt a more cautious stance toward Takefuji," the rating agency added.
Acom is seen as the strongest financially among the top four consumer lenders, due in large part to its ties with Mitsubishi UFJ Financial Group (8306.T), which has a 37 percent stake. Promise is about 20 percent owned by Sumitomo Mitsui Financial Group (8316.T).
Tougher credit rules and interest repayments have already claimed several victims. Credia became the first listed consumer finance firm to fold in 2007 while SFCG Co, a lender to small companies, failed in 2009 with more than $3 billion in debts.
Late last year, Aiful staved off bankruptcy by convincing its creditors to defer about 280 billion yen in bank loan principal payments, using a debt rescheduling procedure called "alternative dispute resolution.
(Reporting by Taro Fuse. Taiga Uranaka and Noriyuki Hirata, writing by Tim Kelly; Editing by Nathan Layne and Chris Gallagher)
LANSING, Mich. – After a two-month shutdown, oil flowed Monday through a pipeline that leaked more than 800,000 gallons of oil in southern Michigan this summer, with some of it polluting a major river.
Enbridge Inc. confirmed the gradual restart of the pipeline running between Griffith, Ind., and Sarnia, Ontario, was under way in a short statement released Monday evening. The pipeline had been shut down since the company reported a massive oil leak July 26. An estimated 820,000 to 1 million gallons spilled near Marshall and some reached the Kalamazoo River.
Enbridge said the restart is a "staged process" run in accordance with a restart plan approved by the federal Pipeline and Hazardous Materials Safety Administration. Monday was the earliest a gradual return to service was permitted by federal regulators.
The pipeline will restart at lower pressure. An independent third party that reports to federal regulators will help monitor the restart.
The Pipeline and Hazardous Materials Safety Administration issued a statement saying it also was keeping tabs on Enbridge during the restart and had staff located throughout the pipeline system to oversee it.
Enbridge will have to make multiple repairs on the pipeline within 180 days, and it will have one year to replace a section of dented pipe running under the St. Clair River in southeast Michigan.
In August, Enbridge estimated cleanup and other costs from the spill could be $300 million to $400 million. The charges include the emergency response, cleanup, repairs, claims by third parties, lost revenue and other items. It excludes possible fines and penalties.
Insurance is expected to cover most of the cost.
About 2,000 workers were involved in the cleanup and related activities at their peak. The company expects more than 500 workers to remain on the job through October.
Enbridge had bought eight homes near the spill site as of last week. The company is in the final stages of buying another 14 homes, chief executive officer Patrick Daniel said last week.
More than 1,500 oil-damaged birds and animals have been rescued from the spill site. More than 1,300 turtles, more than 100 Canada geese and several muskrats, swans, herons, snakes and frogs have been rehabilitated and released into new homes.
The restart of the pipeline might not have much influence on oil or gas prices. The line approved for a restart Monday has a capacity of roughly 283,000 barrels per day and had moved closer to 190,000 barrels per day — much less than the 670,000 barrel per day Enbridge pipeline between Superior, Wis., and Griffith, Ind., that was shut down from Sept. 9 to 17 because of a spill in Romeoville, Ill.
The Illinois spill caused a brief spike in Midwest gas prices.
"That was a major feeder to some of the larger refineries in the Midwest," said Phil Flynn, an analyst at PFGBest in Chicago. By comparison, Flynn said, the pipeline that leaked in Michigan didn't have as big an impact on the market.
Most analysts expect retail gasoline prices to stay steady in October and November, as supplies remain plentiful and demand is listless compared with a peak summer driving season.
(This version CORRECTS the story to say that some, but not all, of the spilled oil reached the Kalamazoo River.)
The Chinese solar wafer maker jumped 18% to 10.45 in nearly 5 times its average trading volume after it signed a hefty loan guarantee agreement with China Development Bank to fund future expansion. LDK Solar's (NYSE:LDK - News) rivals, such as Suntech Power (NYSE:STP - News), Trina Solar (NYSE:TSL - News) and others, have also struck loan deals with CDB this year. LDK is among top-rated stocks in its industry along with JA Solar (NMS:JASO), ReneSola (NYSE:SOL - News) and Solarfun Power (NMS:SOLF).